Question

1. What is a mutual fund? What is an ETF? How are they different?

2. What are some arguments for why a mutual fund is better than an ETF? What are some of the arguments for why an ETF is better than a mutual fund?

3. Do professional money managers add value by picking the “right” (profitable) investments?

4. In shopping for stock mutual funds, what are the key, listed risk characteristics?

5. In shopping for bond mutual funds, what are some the key risk characteristics that separate one bond fund from another?

6. How do mutual fund managers get paid?

7. Find two different mutual funds and give their major characteristics in the table below. Fund Name Size Inception Date 1y Return 5y Return 10y Return Expense Ratio


8. Mr. Patel had an extremely successful early career, and he was actually able to retire at 45. He wants to move his money into a mutual fund that pays out a lot of cash, but he does not care how much. He also wants to take some risk in hopes of extra returns. Find an appropriate mutual fund and explain your decision.

9. The Santos family is trying to save up for a down payment on a house. They anticipate putting this money down in 5-8 years. They have managed to save up $5,000 as of today. Find an appropriate mutual fund and explain your decision. Be sure to explain your asset class decision.


10. Mr. Thompson heard about precious metals on the radio today and is interested in making an investment. Find three precious metal funds, and find an article that is critical of these funds to give Mr. Thompson options and a different point of view. Explain your findings below.

Answer 1

1)

A mutual fund is an investment type made up of a pool of moneys collected from many investors for investing in securities, bonds, etc. They are usually managed my professional money managers.

• Mutual funds give small retail investors access to professionally managed portfolios of securities.
• The profits and losses have to be faced proportionally.
• Mutual funds are sold in units
• Mutual fund units typically be purchased or redeemed as needed at the fund's current net asset value per share.
• Mutual funds does not trade in stock exchange.
• Mutual funds trade at closing net asset value.
• Mutual funds has minimum investment requirements.
• Mutual funds do not have much tax efficient capability.

An ETF(exchange-traded fund) is a type of security that tracks an index, a commodity, bonds, etc. ETF trades like a common stock on a stock exchange.

• ETFs trade during trading day at exchanges like any common stocks.
• It does not have minimum investment requirements.
• It is tax efficient.